From Slip-and-Fall to Supreme Court Commercial Disputes: Applying Makita v Sprowles to Forensic Accounting Evidence

To an outside observer, Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305 appears to have nothing to do with corporate fraud, shareholder oppression, or forensic accounting. The dispute arose from a workplace personal injury: an employee, Ms Sprowles, slipped and fell down a flight of stairs at Makita’s commercial premises while wearing high-heeled shoes, suffering physical injuries.

The litigation centered on the evidence of an expert physicist, Professor Morton, who had tested the slipperiness of the stairs. Yet, when the New South Wales Court of Appeal delivered its verdict, Mr Justice Heydon (later of the High Court of Australia) penned what became the most frequently cited treatise on expert witness admissibility, demonstrable reasoning, and the basis rule in Australian legal history.

Today, whether litigating a $50 million commercial contract breach in the NSW Supreme Court or evaluating a business valuation in the Federal Court, opposing counsel’s first line of attack against a forensic accountant is almost always an objection grounded in Makita v Sprowles.

1. Heydon JA’s Seminal Formulation (The Makita Criteria)

At paragraph [85] of Makita, Heydon JA distilled the prime requirements that must be met before an expert opinion can be admitted into evidence under Section 79 of the Uniform Evidence Law (or common law):

Heydon JA broke this mandate down into distinct prerequisites:

1. The opinion must be based on a recognized field of specialized knowledge.
2. The witness must have acquired expertise in that field through training, study, or experience.
3. The opinion must be wholly or substantially based on that specialized knowledge.
4. The facts or assumptions upon which the opinion is founded must be identified and proved.
5. The report must expose the reasoning process connecting the factual foundation to the concluding opinion.
6. The opinion must not be a bare assertion or ipse dixit ("it is so because I say it is so").

2. Translating Makita into Forensic Accounting Practice

In physical science, an expert tests stair friction with a pendulum tester. In forensic accounting, an expert tests financial reality using general ledgers, bank records, and financial statements. The evidentiary vulnerabilities identified in Makita apply identically to financial disputes:

3. The High Court's Re-calibration: Dasreef v Hawchar

Litigators must recognize that Heydon JA’s test was subsequently re-evaluated by the High Court of Australia in Dasreef Pty Ltd v Hawchar (2011) 248 CLR 588.

In Dasreef, the High Court warned against reading Heydon JA’s judgment in Makita as if it were a rigid statutory enactment imposing multi-layered common law hurdles beyond the text of Section 79 of the Uniform Evidence Act. The High Court clarified that:

• The Statutory Threshold: Section 79 requires two core elements: (1) specialized knowledge based on training, study, or experience, and (2) an opinion wholly or substantially based on that knowledge.
• Admissibility vs. Weight: Minor defects in demonstrating every subsidiary premise or complete mathematical proof will often go to the weight of the expert evidence rather than its initial admissibility.
• The Core Remains Non-Negotiable: However, the High Court reaffirmed that an expert opinion cannot be admitted if it is untethered from specialized knowledge or fails to disclose its factual premises. If an expert expresses an opinion on an issue without explaining how their training applies to the underlying facts, it is inadmissible.

4. How APES 215 Codifies the Makita Principles

For Chartered Accountants and CPAs, complying with Makita and Section 79 is not just good litigation strategy—it is a mandatory ethical standard under APES 215 (Forensic Accounting Services).

Paragraph 5.6 of APES 215 sets out the required anatomy of an Expert Witness Report, mirroring Heydon JA's criteria point-for-point:

5. The Forensic Litigator’s Makita Compliance Checklist

6. Practical Lessons for Instructing Solicitors

Instructing solicitors and counsel bear a direct responsibility for ensuring their expert's report complies with Makita:

• Audit the Reasoning Before Service: Before serving an expert accounting report, counsel should read it with the critical eye of a trial judge. If you cannot explain why a calculation jumped from Step A to Step B without calling the accountant to explain it, the report breaches the demonstrable reasoning rule.
• Prove the Evidentiary Underpinnings: Never assume that an expert's acceptance of an instruction proves the fact. Counsel must ensure that every bank statement, commercial invoice, and witness statement relied upon by the forensic accountant is formally tendered into evidence.
• Eliminate Conclusory Buzzwords: Scrub reports of conclusory rhetoric. Phrases like "obviously suspicious," "blatant diversion," or "clearly uncommercial" are badges of advocacy that invite a Makita challenge. Let the mathematical schedules do the talking.